Exam 9: Currency Futures and Swaps

Suppose that two counterparties, A and B, enter a three-month forward contract, whereby A sells USD1 million at a forward rate of AUD/USD 1.7662. Which party is likely to default if the spot rate three months hence is 1.7000?

A firm buys AUD1 million, twelve months forward at the USD/AUD exchange rate of 0.5000. The spot rate at settlement is 0.4900. How much will the firm gain or lose on the forward contract?

In currency futures trading, the settlement exchange rate is the:

A firm buys AUD1 million, twelve months forward at the USD/AUD exchange rate of 0.5000. The spot rate at settlement is 0.5100. How much will the firm gain or lose on the forward contract?

Two important functions carried out by futures markets are:

What does ISDA stand for?

In a currency swap involving A receiving euro payments and B receiving Australian dollar payments, a rise in the actual exchange rate expressed as (EUR/AUD) implies:

A firm sells AUD1 million, twelve months forward at the USD/AUD exchange rate of 0.5000. The spot rate at settlement is 0.4900. How much will the firm gain or lose on the forward contract?

Futures contracts emerged:

The size of the Chicago Mercantile Exchange, and the Sydney Futures Exchange, Australian dollar contract is:

An over-the-counter market is:

Consider a 3-year currency swap with a notional principal of AUD100,000, whereby A receives bannual payments in Australian dollars and B receives annual payments in U.S. dollars at a contracted rate of 0.9300 (USD/AUD). The market exchange (USD/AUD) rate assumes the values 0.9500, 0.9300 and 0.8900 at the end of each year. Calculate the cash flows in year three.

Suppose that two counterparties, A and B, enter a three-month forward contract, whereby A sells USD1 million at a forward rate of AUD/USD 1.7662. Which party is likely to default if the spot rate three months hence is 1.7662?

In futures trading, a limit move occurs when:

Suppose that two counterparties, A and B, enter a three-month forward contract, whereby A sells USD1 million at a forward rate of AUD/USD 1.7662. Which party is likely to default if the spot rate three months hence is 1.7000?

Marking-to-market risk of futures trading arises from:

Consider a 3-year currency swap with a notional principal of AUD100,000, whereby A receives annual payments in Australian dollars and B receives annual payments in U.S. dollars at a contracted rate of 0.9300 (USD/AUD). The market exchange (USD/AUD) rate assumes the values 0.9500, 0.9300 and 0.8900 at the end of each year. Calculate the cash flows in year two.

Suppose that two counterparties, A and B, enter a three-month forward contract, whereby A buys USD1 million at a forward rate of AUD/USD 1.7662. Which party is likely to default if the spot rate three months hence is 1.8000?

Which of the following is NOT a means whereby the default risk is controlled in futures trading?

Which statement is INCORRECT?